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Number of office to residential conversions falls by 19% in a year

According to Saving Stream, one of Europe’s largest and fastest growing peer-to-peer secured lending platforms, the number of office to residential conversions has fallen by 19% over the last year from 2,942 in 2014/15 to 2,388 in 2015/16 (Source: DCLG).

Saving Stream explains that the lack of funding available to get projects off the ground, in part due to the Brexit vote, means property developers have not been able to make the most of permitted development rights. First introduced in 2013 and made permanent in April 2016, the permitted development right allows older offices to be converted to residential without the need for a planning application.

As a result of the lack of funding from traditional lenders, Saving Stream has witnessed an increase in developers turning to other forms of finance such as P2P lending or private investment to secure funding for projects.

Commenting, Liam Brooke, Co-Founder of Saving Stream, said: “When there is a clear need for more residential development across the UK, it’s surprising that the number of conversions has fallen over the last year.

“Office to residential conversions tend to be very successful – and with the relaxing of the rules made permanent early in 2016 we would have expected the number of conversions to be on the rise. However, developers need to have ready access to finance in order to get these projects off the ground.

“The lack of bank funding available to developers presents an opportunity for other alternative forms of finance providers to step in and fill this gap. Indeed, since the Brexit vote banks have reduced their exposure to the property market even further giving private investors access to better investment opportunities.

“Densely populated areas such as London and the South East have been particularly badly affected by the housing crisis. In these areas, however, there are also likely to be higher amounts of redundant commercial buildings which could easily be converted.

“We’ve successfully helped to fund a number of projects converting vacant office buildings into residential spaces such as Old Hall Street in Liverpool City Centre with a loan of £3.8m.”

Inspired Homes has used permitted development rights to deliver over 400 new homes in just three years and has a pipeline of hundreds more. Many of these homes have been sold to first-time buyers and home movers earning the average London salary.

Martin Skinner, Chief Executive of Inspired Homes, said: “We recognise the benefits of permitted development rights in delivering new homes quickly to the market and helping to address the housing crisis. As an SME developer, access to funding, often exacerbated by Article 4 Directions that restrict PD rights, is one of the biggest obstacles we face to delivery, so we welcome alternative forms of funding such as peer-to-peer lending. In fact, three years ago, we secured the world’s largest P2P loan of £4.15m to fund our Green Dragon House development in Croydon, enabling us to create 119 new homes.”